پاسخ نامتقارن در بازارهای سهام آمریکای لاتین

Recent empirical work has found causal relationships with varying degrees of strength from the equity market of Mexico to the markets of Argentina, Brazil, and Chile. In this study, we analyze the possibility of response asymmetries in these causal relationships. In particular, using the 1995–1999 daily data on equity price indices from the International Finance Corporation's (IFC) Emerging Markets Database, we analyze market interconnectedness by explicitly taking into account country-specific response anomalies. We find statistically significant asymmetries in the responses of Argentina, Brazil, and Chile to changes in the Mexican equity market — with responses to downturns much outweighing upturns in the equity market of Mexico. The results are consistent with the view that when investing in emerging equity markets in Latin America, investors react to negative stock market movements originating in the Mexican market more heavily than to positive movements.

Low correlations between the world's equity markets indicate that investors may gain from international diversification (see, e.g., Lessard, 1976, Levy & Sarnat, 1970, Meric & Meric, 1989, Solnik, 1974 and Watson, 1978). Several recent studies (e.g., Arshanapalli & Doukas, 1993, Lee & Kim, 1993, McInish & Lau, 1993, Meric & Meric, 1997 and Meric & Meric, 1998) show that the correlations between the world's equity markets have increased substantially and that the benefits of international diversification may have considerably decreased since the 1987 crash. However, gains from international portfolio diversification do not depend solely on correlations. Although increasing worldwide correlations would diminish the benefits of international diversification, regime changes (such as financial liberalization) may reduce market risk and increase expected returns, potentially offsetting the effects of greater correlations. Emerging equity markets have received considerable attention in recent years because of their high returns and their low correlation with developed equity markets (see, e.g., Aggarwal et al., 1999, Aggarwal & Leal, 1997, DeFusco et al., 1996, Divecha et al., 1992, Harvey, 1995, Meric et al., 2001, Meric et al., 2000, Meric et al., 1998, Mullin, 1993 and Ratner & Leal, 1996). Goodhart (1988), Hamao, Masulis, and Ng (1990), King and Wadhwani (1990), Malliaris and Urrutia (1992), and Roll (1988) document a significant increase in the correlation between national equity market movements during the 1987 international equity market crash. Although the effects of the October 1987 international equity market crash on the developed national equity markets has been studied extensively, its effect on the correlations between the emerging markets and between the emerging markets and the developed equity markets has not been studied sufficiently. The objective of this paper is to study the equity market co-movements of the U.S., Argentina, Brazil, Chile, and Mexico before and after the 1987 international equity market crash and examine the impact on the gains of international portfolio diversification in Latin America. The reason to use the crash of 1987 as a watershed is that it is the only worldwide event identified by Aggarwal et al. (1999) affecting many different emerging stock markets. We verify that correlations between these five equity markets increased and the benefits of diversification decreased after the crash. If correlations have increased, the weights of Latin American stock markets in U.S. investors portfolios may decrease unless their estimate of market risk is lower and their expected returns are attractive. Since the early 1980s, emerging markets in Latin America have gone through an eventful financial liberalization process. International investors began to allocate increasing amounts of funds in the region to take advantage of the benefits of diversification, increasing capitalization, liquidity, and decreasing measures of concentration. Following the Mexican financial crisis in December 1994 and the more recent Asian crisis that began July 1997, the process of financial liberalization began to have strong destabilizing effects in emerging markets. Sudden and sometimes unexpected changes in financial flows across countries have attracted increasing research attention on the potential benefits of international diversification and the inherent risks of market contagion. In particular, earlier research indicates that equity markets in Latin America exhibit interconnectedness in varying degrees of strength as a result of rapid capital flows Pagán & Soydemir, 2000 and Soydemir, 2000 and, more recently, slight reductions in the benefits of international portfolio diversification (De Santis & Gerard, 1997). However, the possibility of asymmetries in market responses to external shocks in these economies has been questioned little (e.g., Eun & Shim, 1989, Hamao et al., 1990, Jeon & Von Furstenberg, 1990 and Karolyi & Stulz, 1996). Response asymmetry occurs when returns in one stock market react differently in terms of speed and magnitude to upturns than to downturns in another stock market. A parallel situation can be thought of in testing asset pricing models. For example, Downs and Ingram (2000) show that up market “betas” are not equal to down “betas” in absolute values. In this study, however, we focus on stock market returns from Latin American emerging markets and, therefore, examine asymmetric “spillovers and contagion” across national stock market index returns. Unlike previous studies that adopt a univariate approach, we adopt a different and more informative framework to investigate the possibility of response anomalies in equity market dynamics between a set of Latin American countries by constructing a bivariate vector autoregression (VAR) model. Another advantage of the VAR model is that it does not impose a priori restrictions on the system of equations and allows for artificial shocks to be introduced in the system. We focus on the most capitalized and developed equity markets in the region — Brazil, Argentina, and Chile — that have proven to be very responsive to movements in the stock market of Mexico. As such, we pay particular attention as to how these markets react to external shocks, and we empirically test whether these responses are symmetric. Specifically, we are interested in analyzing whether Brazil, Argentina, and Chile react differently to positive as opposed to negative shocks in the Mexican market. Using the 1995–1999 daily data from the International Finance Corporation's (IFC) Emerging Market Database, we find statistically significant asymmetries in the response of Argentina, Brazil, and Chile to changes in the Mexican equity market. Specifically, we find evidence of impact asymmetries — negative responses outweighing positive responses — and pattern asymmetries — longer time-wise responses to downward as compared to upward shocks. From a policy perspective, a better understanding of such causal relationships can have important implications at the time of conducting monetary policy to achieve stability in financial markets, or when implementing regulatory reforms. The findings of this study can also prove useful to investors when they attempt to devise more effective diversification strategies to improve portfolio performance and achieve better risk–return tradeoffs. Conceptually, response asymmetries may arise from various sources. First, investor optimism or pessimism may result in differential responses in timing and magnitude to shocks generating in other equity markets. Asymmetries may also arise from differences in return expectations among investors about the potential international impact of changes in foreign stock markets Erb et al., 1994 and Odier & Solnik, 1993. For example, a small negative movement in Mexico's market could trigger relatively large declines in the South American markets due to a widespread earnings disappointment among investors rather than as a result of the particular magnitude of Mexico's market decline (Skinner & Sloan, 1999). Thus, it is the disappointment (or satisfaction) arising from the decrease (or increase) in the price of an equity that matters most to investors rather than the real magnitude of this change.1 Lastly, asymmetric responses might also exist as a result of unidentified risk dimensions that are nonetheless priced by investors in these markets (e.g., Fama & French, 1992). Although differences in responses could be due to any of these factors, our main goal in this paper is to identify the existence of asymmetries rather than assess the contribution of each possible source. Testing whether the magnitude and the pattern asymmetries in market responses exist could prove useful to financial investors who want to maximize portfolio performance through diversification.

In this paper, we test for the existence of asymmetries in equity market responses of Argentina, Brazil, and Chile to changes in the Mexican stock market. Asymmetries may arise from differences in return expectations among investors about the potential international impact of changes in foreign stock markets. That is, investors do not only consider changes in prices in Latin American equity markets, but it is also the disappointment and/or satisfaction derived from equity price changes that matter to them. The empirical results show that the magnitude and the length of time in which an upturn in the Mexican market is fully reflected in the markets of Argentina, Brazil, and Chile is significantly different from that of a downturn in the Mexican market. The results are consistent with the view that international investors react to downturns more heavily than rewarding such upturns in the Mexican market. Further, increases in the Mexican market are disseminated to the other markets in Latin America much faster than decreases. The time frame in which the markets of Argentina, Brazil, and Chile fully respond to Mexico's increases and decreases is also found to be substantially different within and across markets. In all, the results show that both the timing, as well as the extent of responses, of the markets of Argentina, Brazil, and Chile is not symmetric when there are shocks to the Mexican stock market. This has important implications for the use of monetary policy as a device for stabilizing the financial sector in such markets. Moreover, it seems that investors who lack local knowledge about the fundamentals of these emerging markets react to changes in a given market by treating them as if all of them belong to the same asset class.